Oil and Shale… | May 30, 2013

God Says Shale Revolution Is Temporary

Andy Hall, who is known as God in the oil markets, says the increased production from shale is temporary

If you want to know what will happen to the oil market from shale drilling, I think you could do worse than to look at what it did to the natural gas market. The boom in drilling eventually reduced prices to the point where it no longer made sense to drill new wells. Obviously, we aren’t there yet with the oil market but inventories are not exactly lean right now. When the drilling slowed down sufficiently to reduce new supplies, nat gas recovered rapidly. It is certainly hard to bet against God, but my guess is that prices will have to fall first before another run higher. How low is hard to say but the estimates I’ve seen are that shale production in most areas is not profitable below about $65. That’s a long way down from here but certainly not out of the question with the global economy in a soft patch.

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America.
I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.